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U.S. Aid Hits Record High -- Fueled by Iraq

March 27, 2006

U.S. aid skyrocketed in 2005--at least in Iraq

The U.S. Agency for International Development just released its initial estimates of how much foreign aid the U.S. government gave to developing countries in 2005. It submitted the figures as part of normal reporting processes to the Paris-based Development Assistance Committee. The overall figure is a stunner: U.S. Official Development Assistance spiked to $27.5 billion in 2005, from $19.7 billion the year before and $11.4 billion in 2001. Adjusting for inflation, that may match or exceed Marshall Plan giving levels, though it is still far less as a share of the U.S. economy--0.22% instead of some 1.1% in 1948–52 [see Clemens and Radelet (2003) The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough?- Working Paper 23].

Iraq unsurprisingly accounts for the lion's share of the increase, receiving $10.2 billion, up from $3.0 billion the year before. That probably constitutes the largest aid transfer between any two countries ever. And U.S. aid to Afghanistan nearly doubled, from $778 million in 2004 to $1.5 billion in 2005.

But aid to the rest of the world was essentially unchanged, from $15.9 billion in 2004 to $15.7 billion a year later. Sub-Saharan Africa did see a notable increase in the “Year of Africa,” from $3.5 billion in 2004 to $4.1 billion in 2005, much of it explained by increases to Ethiopia, probably in food aid, and to Sudan, as support for the new peace process there.

Does this make the U.S. generous? The figure of $27.5 billion for 2005 works out to 26 cents per American per day. Compare that to the United Kingdom, at 29 cents, and the Danes, at 89 cents (2004 figures). Though the United States will move up on the foreign aid component of the Commitment to Development Index in the years ahead, it still won't lead the board. Moreover, aid to Iraq could plummet as fast as it has risen. Only time will tell what happens there.